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Industries to rise and fall in the next financial year

02 July, 2014

As Australian companies ring in the new financial year, business information analysts at IBISWorld reveal the industries set to sink and soar.

Business information analysts at IBISWorld expect the next financial year to hold the promise of increased revenue for a diverse range of industries, from building societies to online education. While these industries are anticipated to outperform the rest, IBISWorld also reveals those set to disappoint.

"This time of year gives us cause to reflect on the corporate achievements of the past 12 months, and also provides the opportunity to look at what the next 12 months will hold for some of Australia's biggest industries – and the wider economy," said IBISWorld General Manager Daniel Ruthven.

"In our analysis, we have identified broader trends influencing the performance of key industries, including an intensifying focus on productivity, and ongoing drive towards technical research and development. Australia's economic topography is in the middle of a transformation, and we are likely to see more industries seeking employees with specialised skill sets. This will drive upskilling and reskilling in the next five to 10 years."

Industries set to rise

Industries to fly

Revenue 2013-14

($ million)

Revenue 2014-15

($ million)

Growth (%)

Building societies




Superannuation fund management services




Online education








Petroleum exploration




Building for the future

Building societies have grown their asset bases significantly over the past five years. Industry revenue is forecast to grow by 15.0 per cent over the next year to reach almost $1.5 billion. The favourable lending conditions of the recent low-interest environment have allowed industry participants to build up their assets. When the tide turns and interest rates start increasing, the industry stands to reap large benefits.

"An increase in interest rates, which is possible in the next year, will significantly boost the revenue generated on the current and future asset base of the sector,” Ruthven said. “We are witnessing revenue per enterprise grow exponentially, but the overall industry is shrinking as societies are acquired by banks and credit unions, and as smaller societies seek mergers with larger players.”

A super result

Superannuation funds management continues to benefit from the large pool of accumulated retirement savings in the system. The industry's revenue is set to increase by 10.5 per cent in the next 12 months to reach $14.0 billion, with more than $800 billion in funds under management.

"Our expansive superannuation system is delivering strong returns for both holders and the funds themselves. Compulsory contributions increased at the beginning of 2013-14, further driving the amount poured into superannuation. This has been coupled with strong returns in the financial markets over the past five years, bolstering consumer sentiment and allowing for some increase in the demand for investment options carrying greater risk," Ruthven said.

Investing in digital classrooms

Improvements in technology, and increasing accessibility to high-speed internet, have made online education increasingly viable for both students and universities. IBISWorld expects the revenue of online education to increase by 10.4 per cent over the next year, to reach $6.5 billion.

"For the time-poor professional, who is combining a hectic work schedule with personal commitments and study, online education is a flexible, less stressful option. The growth in industry revenue is commensurate with a strengthening trend in upskilling and reskilling, which is particularly prevalent when labour market conditions are slow," Ruthven said.

"IBISWorld expects competition to strengthen in the higher education industry as new players enter – such as the newest comprehensive institution, Torrens University Australia. Established players will refresh their offerings in order to compete and attract new students."

Dash for gas

Demand for products located by the petroleum exploration industry is expected to increase over the next five years, in line with rising demand for gas and new technologies for extraction. IBISWorld expects that industry revenue will increase by a healthy 8.2 per cent over the next year to reach $4.6 billion.

"As environmental concerns intensify and the world's emerging economies remain hungry for energy, demand for gas is growing. The industry is pursuing increasingly challenging strategies, including deep-water exploration," Ruthven said.

Keeping the dream alive

Over the past five years, mortgage lenders have significantly increased their residential mortgage portfolios in line with growth in demand for dwellings around the nation, particularly in the capital cities. IBISWorld has identified this increase as being driven by favourable lending conditions, declining interest rates and a suite of government assistance packages designed to help boost demand for residential property.

"For many, the Australian dream of the quarter-acre block still exists. While most will be enjoying a smaller acreage, faith in owning a home remains strong across a broad range of Australian demographics, including new migrants and members of generation X trying to get into the property market," Ruthven said.

Industries set to sink

Industries to decline

Revenue 2013-14

($ million)

Revenue 2014-15

($ million)

Growth (%)

Grain-sheep or grain-beef cattle farming




Automotive electrical component manufacturing




Petroleum refining and petroleum fuel manufacturing




Heavy industry and other non-building construction




Motor vehicle parts and accessories manufacturing




Waiting for rain

Industry revenue in grain-sheep and grain-beef cattle farming is closely correlated with the level of precipitation. Low rainfall causes farmers to struggle with high feed costs for sheep and cattle, and declining grain harvests. IBISWorld expects industry revenue to decline by a staggering 22.6 per cent in the next year, to settle at $7.6 billion.

"Australian agriculture has adopted some incredibly advanced practices and technologies, but there is little that can be done to change weather patterns. Unfortunately, bets are on for El Nino in late 2014, meaning drier conditions with low rainfall – something pastoralists are unlikely to welcome," Ruthven said.

Lights out for component manufacturing

IBISWorld analysts expect industry revenue for automotive electrical component manufacturing to continue its long-term decline, closely following the decline in domestic car manufacturing. Over the course of the next financial year, industry revenue is set to decline by 11.2 per cent, to settle at $819.1 million.

"Demand for Australia-made instrument clusters, switches, sensors, stalks, tachometers, and other electrical bells and whistles is expected to continue a long-term decline due to the withdrawal of GM Holden, Toyota and Ford from domestic car manufacturing. The continued strength of the Australian dollar means that cheap components can be imported from elsewhere. Some operators have taken steps to futureproof their revenue by looking for markets overseas, but these companies are in the minority," Ruthven said.

Bumpy road ahead

In a similar vein to the automotive electrical components industry, the parts and accessories sector is likely to suffer a decline in revenue in 2014-15. Demand for motor vehicle parts and accessories manufacturing will be increasingly sluggish as the remaining three car manufacturers wind down operations for good. IBISWorld analysts expect revenue in the industry to shrink by 5.4 per cent in the next 12 months.

"Being unable to achieve a critical mass of production to remain viable, many companies in this industry face either foreclosure or a tough economic transformation to remain alive. Some companies have diversified to survive and some have retained strong export markets in niche parts, but the outlook remains bleak," Ruthven said.

Failing fuels

While demand for petroleum and its by-products is increasing, with more cars on the road than ever, this is unlikely to translate into growth for fuel refining and manufacturing in Australia. IBISWorld expects that revenue across the industry will decline by 7.7 per cent in the next year as refineries are closed, sold, repurposed or mothballed.

Heavy lifting

Heavy industry and other non-building construction relies on demand from the resources sector, and has enjoyed bumper growth in recent years. After this strong performance, tapering investment and projects near completion mean the industry is forecast to contract by 6.0 per cent in the next financial year, to $53.1 billion.

Ruthven said: "Demand from the resources sector is expected to decline in 2014-15 as large-scale investment projects come to a close. This is broadly in line with the resources sector moving from its investment phase to its production phase, which translates to a lesser requirement for construction."

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